Tips For An FHA Home Loan

April 21, 2009 by  
Filed under Home Finance

New homeowners have many incentives to get a mortgage loan. This includes attractive rates for first time home buyers, a tax rebate and the option to get an FHA loan. FHA mortgages are backed by the Federal Housing Authority and were developed as a way to help people move from renting to buying homes.

America was, at one time, a nation of renters. Getting a mortgage was difficult as the banks at one time required 50 percent down. Savings and Loan lenders began financing mortgages in the 1960s, but still required 20 percent down to buy a home. When you buy a home through the FHA lending program, you can put as little as 3 percent down. You can also save on various closing fees that are passed on to the seller when you buy a loan through this program.

Because the FHA mortgage is backed by the federal government, it requires a bit more paperwork and time than a conventional mortgage. For those who want to buy a home and get a lower rate as well as put less money down for the loan, the FHA mortgage is ideal. This program, however, is only available to first time home buyers. There is also a limit as to the amount of the home being purchased with the FHA loan. You can only use the FHA mortgage once.

In order to qualify for an FHA mortgage, the borrower has to have decent credit. They have to be working and be able to afford the mortgage payments, just as they would with a regular mortgage. There is also a matter of housing inspection that has to be performed by an FHA approved inspector.

Many sellers do not like selling to an FHA buyer because of the fees that the seller must incur in accordance with the FHA lending rules. These fees, such points and lender fees, are normally incurred by the buyer in the mortgage loan transaction. This can be remedied by the buyer paying for the fees outside of closing. This means that the buyer will issue a check to the seller for the amount of fees that are reflected paid by the seller on the closing statement, also known as the HUD 1.

If you are a first time home buyer and want to get a competitive mortgage interest rate as well as be able to buy a home with little money down towards the purchase, you should consider buying a house through the FHA lending program, you can talk to your mortgage broker about obtaining an FHA loan. If you are a first time home buyer, you should be eligible for the program.

Your mortgage broker will be able to help you find a lender that deals with FHA mortgages and that will be able to help you with this lending process. You will still have to provide the same amount of information for the FHA mortgage that you do for a conventional mortgage, but will usually have to sign more papers for this federal government backed home loan.